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Should I Avoid Qorvo Inc (QRVO)?

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·6 min read
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Is Qorvo Inc (NASDAQ:QRVO) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Qorvo Inc (NASDAQ:QRVO) was in 40 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 51. QRVO has experienced a decrease in support from the world's most elite money managers recently. There were 41 hedge funds in our database with QRVO positions at the end of the first quarter. Our calculations also showed that QRVO isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Seth Klarman of Baupost Group
Seth Klarman of Baupost Group

Seth Klarman of Baupost Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let's take a peek at the key hedge fund action regarding Qorvo Inc (NASDAQ:QRVO).

Do Hedge Funds Think QRVO Is A Good Stock To Buy Now?

At the end of June, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from one quarter earlier. On the other hand, there were a total of 51 hedge funds with a bullish position in QRVO a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

More specifically, Baupost Group was the largest shareholder of Qorvo Inc (NASDAQ:QRVO), with a stake worth $1043.7 million reported as of the end of June. Trailing Baupost Group was Select Equity Group, which amassed a stake valued at $278.3 million. Iridian Asset Management, Fisher Asset Management, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Baupost Group allocated the biggest weight to Qorvo Inc (NASDAQ:QRVO), around 8.47% of its 13F portfolio. Breakline Capital is also relatively very bullish on the stock, setting aside 7.61 percent of its 13F equity portfolio to QRVO.

Due to the fact that Qorvo Inc (NASDAQ:QRVO) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there is a sect of money managers that decided to sell off their entire stakes by the end of the second quarter. Interestingly, Richard Mashaal's Rima Senvest Management dumped the largest investment of the "upper crust" of funds tracked by Insider Monkey, worth an estimated $100.9 million in stock. Martin D. Sass's fund, MD Sass, also dumped its stock, about $29.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds by the end of the second quarter.

Let's go over hedge fund activity in other stocks similar to Qorvo Inc (NASDAQ:QRVO). These stocks are Cheniere Energy, Inc. (NYSE:LNG), Martin Marietta Materials, Inc. (NYSE:MLM), Edison International (NYSE:EIX), Extra Space Storage, Inc. (NYSE:EXR), Kellogg Company (NYSE:K), Paycom Software Inc (NYSE:PAYC), and Western Digital Corporation (NASDAQ:WDC). This group of stocks' market valuations resemble QRVO's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LNG,49,2944377,9 MLM,34,2014762,-7 EIX,18,1386816,-17 EXR,21,176013,-7 K,32,482871,0 PAYC,39,1149714,-7 WDC,57,2114351,-1 Average,35.7,1466986,-4.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.7 hedge funds with bullish positions and the average amount invested in these stocks was $1467 million. That figure was $2300 million in QRVO's case. Western Digital Corporation (NASDAQ:WDC) is the most popular stock in this table. On the other hand Edison International (NYSE:EIX) is the least popular one with only 18 bullish hedge fund positions. Qorvo Inc (NASDAQ:QRVO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for QRVO is 55.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately QRVO wasn't nearly as popular as these 5 stocks and hedge funds that were betting on QRVO were disappointed as the stock returned -16.3% since the end of June (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.